For many homeowners, the idea of remortgaging can seem daunting. Whether it's the allure of a better interest rate, the need to release equity, or simply a change in personal circumstances, remortgaging offers various benefits. This guide aims to demystify the process, providing you with the essential knowledge to make an informed decision about whether remortgaging is right for you.
Remortgaging involves switching your current mortgage to a new deal, either with your existing lender or a different one. It's essentially the process of paying off your existing mortgage with a new one. This can be done for various reasons, but the primary goal is often to save money. It's worth noting that remortgaging is different from taking out a second mortgage, where you borrow money secured against the equity in your home.
|Remortgaging||The process of switching your existing mortgage to a new deal, either with your current lender or a different one.|
|Equity||The difference between the value of your property and the amount of mortgage you owe. If your home is worth £250,000 and you owe £150,000, your equity is £100,000.|
|Early Repayment Charge (ERC)||A fee you might have to pay if you repay your mortgage (or overpay more than the allowed amount) during a specified period.|
|Exit Fee||A charge by your current lender when you move to a different mortgage or lender.|
|Valuation Fee||A fee charged by a lender to assess the value of your property.|
|Booking/Arrangement Fee||A charge by the new lender for setting up the mortgage.|
|Negative Equity||When the value of your property is less than the amount you owe on your mortgage.|
|Second Charge Mortgage||A loan secured on a property on which there's already a mortgage.|
|Fixed-Rate Mortgage||A mortgage where the interest rate remains the same for a set period.|
|Variable Rate Mortgage||A mortgage where the interest rate can change, usually in line with the Bank of England's base rate or the lender's standard variable rate.|
|Overpayment||Paying more than the required monthly mortgage repayment, reducing the overall amount owed.|
|Mortgage Payment Holiday||An agreed break from making mortgage payments for a short period|
There are several compelling reasons why homeowners might consider remortgaging:
Navigating the remortgaging process can be smoother with an understanding of the steps involved:
|1||Research||Start by assessing your current mortgage deal. Understand any penalties for leaving early and determine the potential benefits of a new mortgage deal.|
|2||Seek Advice||Consider consulting with a mortgage advisor or broker. They can provide insights into the best deals available based on your circumstances.|
|3||Application||Once you've chosen a new mortgage deal, you'll need to go through the application process, much like you did with your initial mortgage. This will involve credit checks and potentially property valuation.|
|4||Legal Work||A solicitor or conveyancer will handle the legal aspects of the remortgage, ensuring the transition from one lender to another is seamless.|
|5||Completion||Once everything is approved, and the legal work is complete, your new mortgage will pay off your old one. You'll then start making payments based on the terms of your new mortgage deal.|
Remortgaging can offer financial benefits, but it's also essential to be aware of potential costs:
Remortgaging comes with its set of advantages and potential pitfalls:
Before making the decision to remortgage, consider the following:
Remortgaging isn't the only option available:
Remortgaging can be a beneficial financial move, but it's essential to approach it with a full understanding of the potential benefits, risks, and costs. By carefully evaluating your current situation, researching available options, and possibly seeking expert advice, you can make an informed decision that aligns with your financial goals.
Keep up with our news, articles and latest developments!